Parents are a Major Lender to First Time UK Home Buyers

Parents are a Major Lender to First Time UK Home Buyers

First time buyers are still finding it difficult to get on the property ladder. They may be taking advantage of the lower asking prices in the housing market and the low interest rate mortgages offered by lenders, but there are many that are still waiting, saving, and trying to find an opportunity. It is no surprise that first time buyers are much older than those that bought their first home decades ago due to the difficulty. It is also no surprise that one of the well-known lenders that assist first time buyers with their goal is the Bank of Mum and Dad.

According to a recent survey of homebuyers in the UK, it found that parents are contributing at a high rate to their children to help them become homeowners. In fact, the average amount of money parents contributed toward the purchase of a home for their children amounted to £24,100, which was up by more than £6,000 compared to the average from 2019.

The survey by Legal & General reported that the average deposit for a first time buyer is now  £32,841.

The total value parents have gifted to their children to become homeowners in the last year amounted to £6.3 billion. This level of mortgage lending makes the Bank of Mum and Dad on level with the 10th largest mortgage lender in the UK. According to a report by UK Finance, the 10th largest mortgage lender was Clydesdale Bank which issued £5 billion. The 9th largest mortgage lender was Virgin Money which lent out £6.8 billion.

Parents are finding many ways to help their children with the support, with one being to take out cash on the built up equity on their own property. Through an equity cash release remortgage the parents could not only come up with the assistance for their child, but they could also secure a low interest rate to save money overall on their current mortgage deal.

However, experts suggest that parents should be warned that for many the built up equity in their own property is a retirement fund and any debt put back onto their mortgage should be a careful consideration as it impact their financial health for years to come at a time when their income could drastically change as they step away from the workforce.

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